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The FSA recently published an interesting speech by Tracey McDermott, its acting director of the enforcement and financial crime division, which confirmed that credible deterrence is here to stay.

The Financial Conduct Authority will carry on the FSA’s enforcement work, maintaining and where necessary strengthening its outcomes. Where improvements are not visible, the FCA will be willing to take even tougher action.

Ms McDermott explained that central to the FCA’s approach will be a focus on early intervention, looking to take action before risk crystallises. She mentioned that early intervention can take many different forms including the controversial proposed power for the FCA to ban products where it considers the risk of mis-selling those products significantly outweighs any benefit.

Ms McDermott gave a warning that the FCA will have a lower tolerance for firms that only fix things when they are told to

However, early intervention will also include a willingness to take action – supervisory or enforcement – earlier in the product cycle. Consumers might expect to see the FSA take action, including enforcement action, where it believes that a particular aspect of the firm’s business model – its product selection, its remuneration practices, its training or recruitment, for instance – is likely to give rise to poor consumer outcomes.

In addition to this Ms McDermott gave a warning that the FCA will have a lower tolerance for firms bumping along at the bottom – firms that only fix things when the FCA tells them to, and then do only enough to fix the specific problem. The FCA will be swifter and more willing to take action to restrict, or even prevent, such firms from doing business.

The FSA had a very busy 2011, publishing notices imposing total fines of £66m, which included the highest ever fine on an individual (£6m). In addition to that 2012 has already seen penalties of over £14m imposed on firms and individuals for a wide range of failings. It appears that the FCA will eclipse that when it comes into existence and will be armed with an array of formidable intervention tools.

The message is clear, be very, very afraid of the FCA.

Simon Lovegrove is a lawyer with the financial services team for Norton Rose LLP